Question

Rory McIlroy, professional golfer from Northern Ireland, won the 2019 FedEx Cup which paid him $17 million.

a) If Rory decided to invest the entire $17 million to fund scholarships in his home country forever, how much could he provide annually if the interest rate on the investment was 5% (compounded annually) and scholarships are paid at the beginning of the year?

b) If Rory could invest the funds at 5% compounded quarterly, what is the total amount of annual scholarships that could be provided at the beginning of each year?

c) If Rory instead invested the funds for 2 years at 5% compounded quarterly, then established the scholarship fund, what is the total amount of annual scholarships that could be provided beginning in 2 years? (Scholarships are provided at the beginning of each year).

Answer 1

a.

Present value	17000000
Interest rate	5%
Annual Amount	850000	1700000*0.05

b.

Present value	17000000
Quaterly Interest	5%
Annualised Interest	5.09%	((1+(0.05/4))^4)-1
Annual Amount	865300	1700000*0.0509

c.

Present value	17000000
Quaterly Interest	5%
Annualised Interest	5.09%
Value after 2 years	$18,774,643.77	FV(5.09%,2,0,-17000000,1)
Annual Amount	$955,629.37	18774643*0.0509